Insurers to revise cargo cover terms

MUMBAI: Businesses will soon have to ensure that they hire transport companies with modern fleet. Non-life insurers plan to revise the terms of their cargo insurance policies, whereby they will not pay for claims for cargo damaged due to accidents caused by the vehicle not being roadworthy. The revised conditions also specifically cover shipments through courier service providers — an area where the clauses were ambiguous so far.

Until now, the shippers’ responsibility was to ensure that they protect all rights against the transporter. If there was any accident arising out of negligence of the transport company, insurers would attempt to recover the claim amount from the transporter. This is the first time that insurance companies are saying they will not pay for an omission on the part of the transporter — that is not maintaining roadworthy vehicles. The exclusion will, however, not apply if the transporter uses an unfit vehicle without the knowledge of the insured.

Another proposed variation is that insurers will now reject claims where the packaging was inadequate for the particular transit undertaken. Although cargo insurance is not subject to any tariff, insurance companies provide a standardised cover based on what they call the Inland Transit Clause. The terms of the cover are standard across companies which makes it simpler for lenders and for legal interpretation if there is any dispute.

Earlier this week, the General Insurance Council — the association of non-life companies, which is supported by the regulator said the Inland Transit Clauses were being revised in keeping with the amendments to the Institute Cargo Clauses — wordings used for insurance of cross-border cargo. The terms of insurance of global trade of goods is determined by the ‘Institute Clauses’ — a generic term used to describe universally-accepted contract wordings drafted by the Institute of London Underwriters.

The new transit cover contains a clause which states that “In no case shall this insurance cover loss damage or expense arising out from unfitness of container or land and or rail conveyance where the loading is carried out by the assured or their employees and they are privy to such unfitness at the time of loading. The council has asked for comments on the new clauses by July 30.